Systems and methods for administering an exchange traded product (ETP) that operates entirely in cryptocurrency/blockchain

ABSTRACT

A crypto ETP is administered by a portfolio modeling computer/(PMC), a fund administration computer/(FAC), an order taking platform computer/(OTP), a custodian computer/(CC), and a paying agent settlement computer/(PASC). The PMC defines the ETP and captures data for a cryptocurrency index. The CC tracks Underlying Assets held by the ETP, and sends the data to the FAC, which calculates the NAV of the Underlying Assets to generate a Portfolio Composite File/(PCF) sent to the OTP. The OTP receives and validates/confirms with the CC, orders for creations and redemptions of the ETP from Authorized Parties/(APs), in exchange for the Underlying Assets and/or cryptocurrency. The PASC provides settlement on the Exchange in cryptocurrency by: receiving confirmation from the CC of transfer of underlyings, ETPs or cryptocurrency from the APs to a blockchain wallet associated with the PCM; and issuing units of the ETPs, underlyings or cryptocurrency to the APs.

This application is a continuation of U.S. patent application Ser. No.16/832,030, titled “Systems and Methods for Administering an ExchangeTraded Product (ETP) That Operates Entirely inCryptocurrency/Blockchain,” filed on Mar. 27, 2020, which claims thebenefit of U.S. Provisional Patent Application Ser. No. 62/824,800,entitled “Systems and Methods for Administering an Exchange TradedProduct (ETP) That Operates Entirely in Cryptocurrency/Blockchain,”filed on Mar. 27, 2019, the contents of both of which are incorporatedherein by reference in their entirety for all purposes.

BACKGROUND Technical Field

This invention relates to data management systems and more particularlyto an automated system for aggregating and transforming data fromdisparate market trading and portfolio management computers to model andproduce an exchange-traded product of cryptocurrencies having unitstradable on a secondary market exchange.

BACKGROUND INFORMATION

An OMS (order management system), also referred to as an OTP (ordertaking platform) is a specialized computer system developed to manageand execute securities orders in an efficient and cost-effective manner.These systems execute at volumes, speeds and with levels of security andredundancy that require specialized computer hardware and software. Manyversions of OMSs have been developed by various entities for use byparticular parties to perform their distinct roles in the securitiesorder and trading process. For example, OMSs are used on both thebuy-side (e.g., by a fund) and the sell-side (e.g., brokers anddealers), with differing functionality. Brokers and dealers use OMSsspecifically customized for their sell-side use when filling orders forvarious types of securities and are able to track the progress of eachorder throughout the system. Markets (exchanges) use OMSs that have beenspecifically customized for their use to manage their operations.Typically only exchange members can connect directly to an exchange,which means that sell-side OMSs may have exchange connectivity, whereasbuy-side OMSs are concerned with connecting to sell-side firms. OMSsallow firms to input orders to the system for routing to pre-establisheddestinations. They also allow firms to change, cancel and update orders.When an order is executed on the sell-side, the sell-side OMS must thenupdate its state and send an execution report to the order's originatingfirm. OMSs support portfolio management by translating intended assetallocation changes into marketable orders for the buy-side. These assetallocation changes typically involve rebalancing a fund's assetallocation to correct for market valuation changes and cashflows, toalign an Index Fund with its target index, and to make discretionary ortactical changes initiated by fund managers.

Exchange Traded Products (ETPs), including Exchange Traded Funds (ETFs),Exchange Traded Commodities (ETCs), Exchange Traded Notes (ETNs), andExchange Traded Instruments (ETIs), etc., can take a variety of forms.The most common, ETFs, are essentially a special type of mutual fund(or, less commonly, unit investment trust (UIT)) whose shares trade on asecurities exchange. ETF shares may be created or redeemed in unitbasket amounts by broker-dealer firms serving as “authorizedparticipants” in the ETF. For most ETFs, creation and redemption ofunits takes place primarily through the delivery of baskets ofsecurities that closely replicate the current unit holdings of the ETF.ETFs that trade publicly in the U.S. are registered under the 1940 Actas mutual funds or UITs, and are subject to the same investmentrestrictions as non-ETF versions of those vehicles.

In light of these complexities, specialized exchange-traded fund (ETF)OMSs have been developed to help manage ETFs. ETF OMSs handle thesophisticated operational flows associated with ETFs, including the waytheir shares are created and redeemed. As mentioned, rather than cash,institutional investors usually deposit a basket (“creation basket”) ofstocks “in kind” with the fund in exchange for ETF shares. Typicallymirroring the ETF's portfolio, the contents of this creation basket aremade available publicly on a daily basis. Likewise, ETF shares can beexchanged for a basket (“redemption basket”) of securities and,sometimes, cash. ETFs must generate these baskets day after day,involving sophisticated risk analytics as well as specializedfront-office systems. The accounting side of the operation must also bemanaged accurately. A net asset value (NAV) for the ETF must not only becalculated at the end of each day, but also a projected NAV for thefollowing day. And as ETF share prices can fluctuate during the day, theETF OMS must also generate its own intraday version of the NAV. This inturn will determine the contents and hypothetical value of the nextday's basket. An example of an ETF OMS is the FlexOMS ETF platformcommercially available from FlexTrade System, Inc. (Great Neck, NY). ETPOMS solutions are also commercially available from Charles RiverDevelopment (CRD), Burlington, MA.

ETFs were first introduced in the U.S. market in 1993 and have enjoyed ahigh rate of growth in assets and trading volume almost since itsintroduction. The vast majority of ETFs are ‘passive’, i.e., those basedon popular benchmark indexes. Conventional ETFs are based on baskets ofconventional assets. It would be desirable, however, to provide ETFs,and ETPs in general, configured to handle cryptocurrency assets.Conventional facilities, including OMSs available for the operationalmanagement of passive ETFs are in many respects inappropriate for these‘crypto’ ETPs, e.g., because of the difficulty of accurately determiningthe value, and thus the NAV, of potentially highly volatile cryptoassets on a timely basis.

Therefore, a need exists for a system and method capable of retrofittingand leveraging conventional OMSs and Exchange infrastructure to createand manage crypto ETPs.

SUMMARY

The appended claims may serve as a summary of the invention. Thefeatures and advantages described herein are not all-inclusive andvarious embodiments may include some, none, or all of the enumeratedadvantages. Additionally, many additional features and advantages willbe apparent to one of ordinary skill in the art in view of the drawings,specification, and claims. Moreover, it should be noted that thelanguage used in the specification has been principally selected forreadability and instructional purposes, and not to limit the scope ofthe inventive subject matter.

BRIEF DESCRIPTION OF THE DRAWINGS

The present invention is illustrated by way of example and notlimitation in the figures of the accompanying drawings, in which likereferences indicate similar elements and in which:

FIG. 1 is a functional block diagram showing structural aspects of oneembodiment of the present invention;

FIG. 2A is a table showing operational aspects of an embodiment of thepresent invention;

FIG. 2B is a functional block diagram showing the operational aspects ofFIG. 2A;

FIG. 3A is a table showing additional operational aspects of anembodiment of the present invention;

FIG. 3B is a functional block diagram showing the operational aspects ofFIG. 3A;

FIG. 4A is a table showing additional operational aspects of anembodiment of the present invention;

FIG. 4B is a functional block diagram showing the operational aspects ofFIG. 4A;

FIG. 5A is a table showing additional operational aspects of anembodiment of the present invention;

FIG. 5B is a functional block diagram showing the operational aspects ofFIG. 5A;

FIG. 6A is a table showing additional operational aspects of anembodiment of the present invention;

FIG. 6B is a functional block diagram showing the operational aspects ofFIG. 6A;

FIG. 6C is a flow chart showing additional aspects of embodiments of thepresent invention;

FIG. 6D is a flow chart showing additional aspects of embodiments of thepresent invention;

FIG. 6E is an image of a graphical user interface displaying variousaspects of the present invention;

FIG. 6F is an image of another graphical user interface displayingvarious aspects of the present invention;

FIG. 6G is an image of still another graphical user interface displayingvarious aspects of the present invention;

FIG. 7 is a graphical representation of aspects of an embodiment of thepresent invention;

FIG. 8 is a table showing exemplary aspects of the embodiments of thepresent invention;

FIG. 9 is a table showing exemplary aspects of the embodiments of thepresent invention;

FIG. 10 is a table showing exemplary aspects of the embodiments of thepresent invention;

FIG. 11 is a table showing exemplary aspects of the embodiments of thepresent invention;

FIG. 12 is a table showing exemplary aspects of the embodiments of thepresent invention;

FIG. 13 is a table showing exemplary aspects of the embodiments of thepresent invention; and

FIG. 14 is a block diagram of one embodiment of a computer system usablewith embodiments of the present invention.

DETAILED DESCRIPTION

It should be understood at the outset that, although exemplaryembodiments are illustrated in the figures and described below, theprinciples of the present disclosure may be implemented using any numberof techniques, whether currently known or not. The present disclosureshould in no way be limited to the exemplary implementations andtechniques illustrated in the drawings and described below.Additionally, unless otherwise specifically noted, articles depicted inthe drawings are not necessarily drawn to scale. In addition, well-knownstructures, circuits and techniques have not been shown in detail inorder not to obscure the understanding of this description. Thefollowing detailed description is, therefore, not to be taken in alimiting sense, and the scope of the present invention is defined by theappended claims and their equivalents.

General Overview

As shown and described in the accompanying Figures, embodiments of thepresent invention include systems and methods for administering anexchange traded product (ETP) that operates entirely incryptocurrency/blockchain, e.g., in which the assets underlying the ETPinclude cryptocurrency, and the currency used to redeem ETP shares (aka‘units’) and/or trade the ETP units on secondary markets, iscryptocurrency. Indeed, these embodiments include technical solutionsincluding an accounting process and software that enable the creation ofa crypto ETP and the settlement of transactions involving the ETP usinga crypto-native process that leverages crypto PCFs (Portfolio CompositeFiles), crypto-based order taking platforms, blockchain records, andsettles against information from public blockchains, running acrypto-native accounting platform.

Aspects of the invention include the recognition that heretofore, noeffective solutions were available for creating ETPs or other structuredproducts in the crypto space that address regulators' concerns withregards to the sector. This problem takes various forms:

-   -   Slippage on CR/RD (creation/redemption) as well as Rebalancing:        given the high volatility in the underlyings, it was virtually        impossible to reproduce an index in a daily traded product        without creating significant discrepancies vs the benchmark.        With the lack of margin lending available, cash actual        accounting or other conventional forms of back-charging are        unsuited to the space. The instant embodiments lead to a        relatively low, if not effectively zero, tracking error versus        the benchmark.    -   Cash-Less Product: In order for the product to work, the instant        inventors recognized that aspects of the process needed to be        entirely cash-less (e.g., CR/RD, fees, and/or settlement). This        is because of the slippage issue mentioned above as well as the        need to settle DFP/FOP        (Delivery-Free-of-Payment/Free-of-Payment), which is highly        uncommon, if not non-existent, in conventional funds/markets.    -   Pricing: Given the volatility and the lack of consistency across        platforms or geographies in the pricing of crypto assets (either        in USD or in other currencies), there may be significant        discrepancies between the prices shown by data aggregators and        executable pricing. This may lead to significant market        inefficiencies and can make replicating an index that is settled        daily extremely challenging.    -   Settlement: Prior to the instant invention, there was no        infrastructure available to allow people to settle public market        securities against blockchain transactions. The instant        embodiments bridge the gap between the two markets allowing for        close to real time settlement (typically a couple of hours).        This helps to effectively eliminate counterparty risk during the        transaction and allow all market participants greater visibility        into the product.    -   Custody: Prior to the instant invention, there was no ability to        integrate cold storage (i.e., storage for inactive data) into an        ETP product to verify deposits which exist on a crypto currency        blockchain.

These embodiments thus provide a technical solution made up ofprocess/accounting infrastructure/technical (IT) infrastructure thatallows the instant embodiments to run an entirely crypto nativeecosystem, including the following.

-   -   1) Crypto denominated accounting books with crypto denominated        final terms/PCF outputs. US Dollar values are typically only        generated as a final output.    -   2) New OTP configured to run off of crypto inputs and wallet        addresses in addition to the traditional cash NAV and SSI        system. This allows these embodiments to make the content        generated in (1) actionable for APs and other trading        counterparties.    -   3) New settlement process which allows these embodiments to use        an entirely crypto settled PCF by making use of information from        public blockchains and reconciling this to outputs generated by        the OTP in substantially real time.    -   4) APs are then able to price on exchange based on true        execution pricing for the underlyings as opposed to relying on        pricing through 3rd party aggregators.

These embodiments thus address the slippage, pricing, and cash-lessproduct concerns as follows.

-   -   Slippage: APs are able to CR/RD on a crypto basis. This        effectively eliminates the possibility of slippage as the system        goes out to 8 decimal places on all orders. APs are able to        deliver the precise amount of crypto (Underlying Assets)        required.    -   Pricing: These embodiments run entirely crypto native accounting        books and allow users to see a true crypto entitlement of the        notes they have purchased. APs can use this to price the notes        on exchange in a more understandable, transparent and efficient        way based on executable pricing across multiple markets. This        results in greater overall market efficiency.    -   Cash-Less/Settlement: By settling orders entirely in crypto,        these embodiments may settle DFP/FOP within a couple of hours by        reconciling directly to records on the public blockchain. This        provides substantial certainty of deposit/withdrawal regardless        of the time of day or the status of the market.    -   Custody: By integrating directly with block explorers and        specialized custodian computers (CCs).

The solution provided by these embodiments is counter-intuitive andcontrary to conventional wisdom. These embodiments are highly complexand do not rely on conventional modes of settling and/or pricing becausesuch conventional approaches are unworkable in a crypto context. Runningan entirely crypto native system is contrary to existing models becausethere are no existing solutions capable of operating in a native cryptoenvironment. The instant inventors have built a new technicalinfrastructure, leveraging various specialized computers, including: aportfolio modeling computer (PMC) 14; a specialized fund administrationcomputer (FAC) 15 that receives Underlying Asset data from a funddatabase and administers trades throughout a trading day for the ETP; aspecialized order taking platform computer (OTP) 16 that interacts withAuthorized Participants (APs) to execute creation and redemption ordersof the ETP throughout the trading day; a specialized custodian computer(CC) 18; and a specialized paying agent settlement computer (PASC) 24;to support the use of a PCF in crypto, crypto wallet settlement, andreconciliation to public blockchains.

Terminology

As used in the specification and in the appended claims, the singularforms “a”, “an”, and “the” include plural referents unless the contextclearly indicates otherwise. For example, reference to “an analyzer”includes a plurality of such analyzers. In another example, reference to“an analysis” includes a plurality of such analyses.

Although specific terms are employed herein, they are used in a genericand descriptive sense only and not for purposes of limitation. Allterms, including technical and scientific terms, as used herein, havethe same meaning as commonly understood by one of ordinary skill in theart to which this invention belongs unless a term has been otherwisedefined. It will be further understood that terms, such as those definedin commonly used dictionaries, should be interpreted as having a meaningas commonly understood by a person having ordinary skill in the art towhich this invention belongs. It will be further understood that terms,such as those defined in commonly used dictionaries, should beinterpreted as having a meaning that is consistent with their meaning inthe context of the relevant art and the present disclosure. Suchcommonly used terms will not be interpreted in an idealized or overlyformal sense unless the disclosure herein expressly so definesotherwise.

Where used in this disclosure various terms are defined as follows:

-   -   CSD means Central Security Depository at SIX, or any other party        appointed by the Exchange in which the Product is listed for the        purpose of settlement.    -   DFP/FOP stands for Delivery-Free-of-Payment and Free-of-Payment,        respectively. They refer to the same settlement process where a        delivery of securities is not linked to a corresponding transfer        of funds. In this case only the securities are moved.    -   DVP refers to delivery versus payment (DVP), a settlement        procedure in which the buyer's payment for securities is due at        the time of delivery.    -   ETP means Exchange Traded Products.    -   Index means Amun Crypto Basket Index (HODL5), Amun Bitcoin        Suisse Index (ABBA), Bitwise 10 Select Index (BIT10), or Amun        Sygnum Platform Winners Index (MOON), and/or substantially any        other group of securities.    -   OTP means order taking platform hosted by the issuer.    -   PCF means Portfolio Composite File.

Product means Amun Crypto ETPs, including series & tranches that areissued in the future.

Underlying(s) or Underlying Asset(s) means any or all of the cryptocurrencies that are the constituents of the Index.

Trading Days means the days that all relevant parties collectivelyagreed on as the days when the Product trades and operates. In Decemberof every calendar year, relevant parties shall agree on the trading daysfor next calendar years and Amun shall notify the APs about the agreedschedule. See, e.g., FIG. 7 , for details regarding trading day schedulefor 2020.

Redemption Process refers two types of redemption: AP Redemption, andInvestor and Issuer Redemption, which follow different mechanisms.Although Investor and Issuer Redemption is permitted under limitedcircumstances, the instant embodiments will be shown and described withrespect to the AP Order & Redemption Processes which are expected to beimplemented routinely in order to support investor trading of units ofthe ETP on the Exchange.

EST means Easter Standard Time and CET means Central European Time.

As used herein, the terms “computer” and “end-user device” are meant toencompass a workstation, personal computer, personal digital assistant(PDA), wireless telephone, or any other suitable computing deviceincluding a processor, a computer readable medium upon which computerreadable program code (including instructions and/or data) may bedisposed, and a user interface. Terms such as “server”, “application”,“engine”, “component”, “module”, “control components/devices”,“messenger component or service,” and the like are intended to refer toa computer-related entity, including hardware or a combination ofhardware and, software. Moreover, the various computer-related entitiesmay be localized on one computer and/or distributed between two or morecomputers. The terms “real-time” and “on-demand” refer to sensing andresponding to external events nearly simultaneously (e.g., withinmilliseconds or microseconds) with their occurrence, or withoutintentional delay, given the processing limitations of the system andthe time required to accurately respond to the inputs.

Programming Languages

The system and method embodying the present invention can be programmedin any suitable language and technology, such as, but not limited to:Assembly Languages, C, C++; Visual Basic; Java; VBScript; Jscript;Node.js; BCMAscript; DHTM1; XML and CGI. Alternative versions may bedeveloped using other programming languages including, Hypertext MarkupLanguage (HTML), Active ServerPages (ASP) and Javascript. Any suitabledatabase technology can be employed, such as, but not limited to,Microsoft SQL Server or IBM AS 400, as well as big data and NoSQLtechnologies, such as, but not limited to, Hadoop or Microsoft Azure.

Referring now to the Figures, embodiments of the present invention willbe more thoroughly described.

FIG. 1 is a block diagram of an exemplary detailed embodiment of acryptocurrency basket index ETP system and method in the form of acrypto ETP facility 10. As shown, Authorized Participant(s) 12 initiatethe creation or redemption of the ETP from the Issuer 14. AuthorizedParticipants 12 will utilize OTP 16 to place the orders and will useblockchain to transfer Underlying Assets directly to the Custodian 18.Custodian 18 manages and stores the Underlying Assets. In particularembodiments, Administrator 15 provides general administration,accounting and fee calculation among other responsibilities. CollateralAgent is responsible for liquidating the collateral in the event of adefault by the issuer 14 pursuant to terms and conditions outlined in anassociated prospectus. Index Calculation Agent 30 (FIG. 2B) calculatesand publishes the value of the Index. It should be noted that inparticular embodiments, Issuer 14 may also serve as the IndexCalculation Agent 30, e.g., determining the value of the aforementionedHODL5, ABBA, and/or MOON indexes. A Technical Listing Agent connects theIssuer 14 with the Exchange 26 in the settlement process, while a GlobalPaying Agent accepts payments from the issuer of a security and thendistributes the payments to the holders of the security. In particularembodiments, the Technical Listing Agent and the Global Paying Agentresponsibilities are performed by the same entity, e.g., as shown at 24.For convenience of explication, both of these roles will be referred tohereinbelow as being performed by Global Paying Agent (‘Agent’) 24.

Having described a relatively detailed embodiment of the presentinvention, in a more generalized embodiment, a system and method isprovided that has a series of specialized computers operating as part ofa specialized trading network, wherein the computers collectively modeland generate data for administering a cryptocurrency basket indexexchange-traded product (ETP) for creation and redemption of ETP units,including securely communicating ETP portfolio data with specializedmarket trading systems, and electronically validating and transformingthe ETF portfolio data and basket data. The system includes a portfoliomodeling computer (PMC) 14 communicably coupled to: a specialized fundadministration computer (FAC) 15 that receives Underlying Asset datafrom a fund database and administers trades throughout a trading day forthe ETP; a specialized order taking platform computer (OTP) 16 thatinteracts with Authorized Participants (APs) 12 to execute creation andredemption orders of the ETP throughout the trading day; a specializedcustodian computer (CC) 18; and a specialized paying agent settlementcomputer (PASC) 24.

The PMC 14 (a) defines a cryptocurrency basket index exchange tradedproduct (ETP) having a number of ETP units available for sale, the ETPunits being tradable on one or more secondary markets (Exchange) 26; and(b) captures via secure File Transfer Protocol (FTP) and/or ApplicationProgramming Interface (API), and decrypts, using a blockchain explorer,an encrypted Index Composition File (ICF) generated by an indexcalculation agent, that includes the composition and value at the end ofeach trading day of a cryptocurrency basket index.

The CC 18 uses a blockchain explorer to track a portfolio ofcryptocurrency assets (Underlying Assets) held by the ETP, at least aportion of the Underlying Assets corresponding to the cryptocurrencybasket index, to generate daily portfolio data including accountstatements with balances of the Underlying Assets, and to encrypt andsend the portfolio data to the PMC 14 and FAC 15 in a native CC formatvia secure FTP and/or API.

The PMC 14 then receives via secure FTP and/or API, and decrypts, duringthe trading day, the portfolio data from the CC 18, and stores andelectronically time-stamps the portfolio data. The FAC 15 receives viasecure FTP and/or API, and decrypts, the portfolio data, and calculates,with a blockchain explorer, a current net asset value (NAV) of theUnderlying Assets held by the ETP each trading day, to generate aPortfolio Composite File (PCF) that includes the NAV. The FAC 15encrypts and uploads the PCF via secure FTP and/or API, to the OTP 16.

The OTP 16 receives via secure FTP and/or API, and decrypts, orders forcreations and redemptions of the ETP units from at least one AuthorizedParty (AP) 12, in exchange for the Underlying Assets and/orcryptocurrency, and uses a blockchain explorer to encrypt, transfer, andvalidate/confirm the orders for creations and redemptions by blockchainto the CC 18, so that the OTP 16 uses the PCF to calculate an amount ofUnderlying Assets or cryptocurrency to transfer during said creationsand redemptions.

The PASC provides settlement of the creations and redemptions of ETPunits on the Exchange 26 in cryptocurrency by: receiving confirmationfrom the CC 18 of transfer of underlyings, ETPs or cryptocurrency fromthe at least one AP to a blockchain wallet associated with the PCM 14;and issuing respective units of the ETPs, underlyings or cryptocurrencyto the at least one AP 12. In this embodiment, the Underlying Assetsheld by the ETP, settlement currency, and record-keeping, are all basedon cryptocurrency and/or blockchain, to support efficient trading of theETP on the Exchange and/or on other secondary markets.

Moreover, as mentioned, in particular embodiments, the OTP performs itsoperations automatically through a series of secure FTP and/or APIintegrations with the other components/parties allowing the system toensure accuracy of the information that is ultimately disseminated tothe market, and to provide a transparent record of the ETP's history.

It should be noted that PCF creation involves integrating, e.g., via theOTP 16, a number of specialized computer systems, to capture and parsedata from the various specialized computers using FTP, xls uploads,and/or custom APIs e.g., used by custodians and blockchains, in variousnative formats (e.g., capturing and parsing files from Custodian(s) andBlockchains in native formats). In particular embodiments this parseddata is aggregated and stored in a local and/or cloud-based database tomaintain daily records of this information. The aggregated data may alsobe distributed to the calculating agents to promote efficiency. Examplesof the data captured, parsed, aggregated, and stored, include that whichis used to calculate the PCF, including custodian balances, prices fromthe index providers/aggregators, and/or information from officialsecurities registers/exchanges and blockchains.

In various embodiments, the OTP 16 also provides for automatedvalidation and checking of the PCF. The OTP automatically calculates itsown internal PCF which it then checks against the values captured fromthe Current Valuation Module/Administrator 15. These embodiments arethus able to identify any errors and allow for correction without humanintervention, to help reduce cost, overhead, time needed to distributedata and the rate of errors in calculations distributed to the market.The associated decrease in errors allows for more efficient operation ofthe various specialized computers used with these embodiments, forefficient price discovery and trading.

The following are more detailed descriptions of aspects and featuresthat may be used in various embodiments of the present invention.

Overview of Timeline and Workflow

Referring now to FIGS. 2A-6B, embodiments of the present inventionprovide for PCF (Portfolio Composite File) creation at day T−1, orderplacement at day T, and settlement at day T+1. Briefly described, PCFcreation involves Issuer/PMC 14 and/or Administrator/FAC creating a filecontaining the portfolio of Underlying Assets (e.g., crypto currenciesthat are the constituents of the Index) and the NAV (Net Asset Value) ofthe portfolio based on index price and allocation. Issuer14/Administrator 15 then uploads the PCF to OTP 16. APs 12 may thenaccess the PCF for creation and redemption orders, as will be discussedin greater detail hereinbelow. Order placement and documentationpreparation takes place on day T and involves an AP 12 placing an ordervia OTP 16, and the Issuer 14/Administrator 15/OTP 16 confirming theorder and preparing necessary documentation for settlement. Settlementtakes place on day T+1 and involves the Paying Agent 24 sendingsettlement instructions to AP 12 via Exchange 26, and Custodian 18confirming receipt/transfer of deliverables with the AP 12.

Turning now to FIGS. 2A and 2B, PCF Creation at day T−1 will bediscussed in greater detail. At Step 1, at the end of the trading day onday T−1, Index Calculation Agent 30 calculates the closing value of theindex portfolio, and includes this closing value in an Index CompositionFile. An exemplary Index Composition File is shown in FIG. 8 . The IndexComposition File is then sent, e.g., via secure FTP, to the Issuer 14directly and/or via Administrator/Accounting Team 15. At Step 2,Custodian 18 provides daily account statements with balances of theunderlying assets, to Administrator/Accounting Team 15 and Issuer 14. AtStep 3, Accounting/FAC 15 calculates daily NAV, PCF (and associatedfees), and uploads the PCF to OTP 16. An exemplary PCF is shown in FIG.9 . At Step 4, OTP 16 sends the PCF and/or generates notification of thenew PCF, to APs 12 and any OTC Partners 32.

Operation Procedures

Referring now to FIGS. 3A-6B, Authorized Participant order processeswill be shown and described. In particular embodiments, an AP 12 createsand/or redeems products (e.g., units of the ETP) from Issuer 14. Thesecreation and redemption orders are settled on day T+1. In particularembodiments, any orders placed after a pre-determined cut-off time on Twill be considered invalid. Similarly, any delivery of underlyings aftera pre-determined cut-off time on T+1 may also be canceled.

Turning now to FIGS. 3A-4B in particular, two types of order activitieswill be discussed: Authorized Participant Creation Order—In Kind (FIGS.3A-3B); and Authorized Participant Redemption Order—In Kind (FIGS.4A-4B). In should also be noted that in addition to AP Redemptions,particular embodiments also provide for Investor & Issuer Redemption,which will be discussed hereinbelow.

As shown in FIGS. 3A-3B, an In-Kind AP Creation Order involves theaforementioned PCF Creation Steps 1-4, followed by order placement Steps5 and 6 on day T and order settlement Steps 7-11 on day T+1.

At Step 5, an AP 12 places creation order on OTP 16, and placessettlement instruction to its back office. An exemplary creation orderform is shown in FIG. 10 . OTP 16 automatically generates a notificationto Issuer 14, Administrator/FAC 15, Global Paying Agent/PASC 24, andCustodian/CC 18. At Step 6, before the end of day T, Issuer/PMC 14delivers an in-kind deposit/withdrawal form to Custodian/CC 18 andAdministrator/FAC 15 uploads an order confirmation to OTP 16. Anexemplary in-kind deposit/withdrawal form is shown in FIG. 11 , and anexemplary order confirmation form is shown in FIG. 12 .

As mentioned, order settlement involves steps 7-11 on day T+1. At Step7, APs 12 transfer the underlying assets to a transaction wallet(blockchain wallet) of Issuer 14. In particular embodiments, the AP'stransaction wallet is managed by Custodian/CC 18 pursuant to settlementinformation received in the Order Confirmation Form. Each AP 12 willhave a designated transaction wallet. Optionally, the APs 12 may providetrade confirmation/screenshot of a trade ID along with the transfer. AtStep 8, the transfer of the underlyings is confirmed by Custodian/CC 18via blockchain, to Issuer/PMC 14, Administrator/FAC 15, and GlobalPaying Agent/PASC 24. At Step 9, upon receipt of the confirmation viablockchain, Global Paying Agent/PASC 24 issues respective units of theETPs to each AP 12 via entry in a book of uncertificated securitiesmaintained by Issuer 14. An exemplary entry into a book ofuncertificated securities is shown in FIG. 13 . Concurrently, GlobalPaying Agent/PASC 24 (i) registers new units of ETPs in the mainregister of Exchange 26 and (ii) credits these to the AP's account atthe Exchange 26 via delivery free of payment (DfP) transferinstructions. At Step 10, final Terms & Conditions are posted byIssuer/PMC 14 on public website and in some instances, to Exchange 26.At Step 11, Exchange 26 clears ETPs on a DFP/FOP(Delivery-Free-of-Payment/Free-of-Payment) basis and creates securitiesin accounts for each AP 12 at CSD (Central Security Depository) (notshown). Also at Step 11, Global Paying Agent/PASC 24 notifies Issuer 14and Administrator of the transaction.

As shown in FIGS. 4A-4B, an In-Kind AP Redemption Order involves theaforementioned PCF Creation Steps 1-4, followed by AP Creation OrderIn-Kind Steps 5 and 6, followed by Steps 107-112 on day T+1.

At Step 107, Issuer 14 instructs Custodian/CC 18 to prepare to withdrawand retrieve underlyings from storage using an In-Kind Withdrawal Form,such as shown in FIG. 11 . At Step 108, Global Paying Agent/PASC 24: (i)deregisters units of ETPs in the main register of Exchange 26 and (ii)debits these ETPs from the AP's account with Exchange 26 via deliveryfree of payment (DfP) transfer instructions. Upon completion of Step108, Step 109 is executed, which involves Global Paying Agent 24notifying Issuer 14 to cancel respective units of ETPs to AP via entryin the Issuers book of uncertificated securities, e.g., as shown in FIG.13 . Global Paying Agent/PASC 24 also notifies Administrator/FAC 15. AtStep 110, Issuer 14 confirms In-Kind Withdrawal, e.g., via phone, withCustodian/CC 18, instructing Custodian 18 to move relevant underlyingsfrom ETP to AP's wallet/account per settlement instructions provided inthe aforementioned order form (e.g., of FIG. 11 . Upon completion ofStep 110, at Step 111, Custodian/CC 18 transfers the underlyings to AP'sdesignated wallet addresses. At Step 112, the transfer is confirmed onblockchain, e.g., by Custodian 18, and AP 12 confirms receipt of therelevant underlyings.

As shown in FIGS. 5A-5B, a Cash AP Creation Order involves theaforementioned PCF Creation Steps 1-4, followed by Steps 205 and 206 onday T, followed by Steps 207-210 on day T+1.

At Step 205, an AP 12 places a creation order on Exchange 16, e.g.,using an order form as shown in FIG. 9 , along with settlementinstructions. Exchange 16 then generates a notification to Issuer/PMC14, Administrator/FAC 15, and Custodian/CC 18 (and optionally to otherparties, e.g., Calculation Agent, Global Paying Agent, Lending Desk, andOTC Desk, etc. (It should be noted that as used herein, reference to‘Exchange’ 26 refers to substantially any market, includingover-the-counter (OTC) markets by which assets may be transacted betweenparties.) At Step 206, Issuer 14 confirms the order with AP 12, e.g., byuploading an order confirmation form such as shown in FIG. 11 .

It should be noted that in various embodiments, the Administrator/FAC 15is communicably coupled to various trading platforms (e.g., Exchanges26) to capture and display ticking quotes for the underlyings so the APs12 know what prices they are paying. Moreover, these embodiments enabletrades to be executed in real time, i.e., substantially immediately oncethe order is placed, to help prevent any slippage from taking place.

At Step 207, AP 12 transfers cash to Custodian/CC 18, and Global PayingAgent/PASC 24 issues respective units of ETPs to AP 12 by uploading toIssuer 14 an entry in the Issuer's book of uncertificated securities,e.g., as shown in FIG. 12 . Concurrently, Global Paying Agent 24: (i)registers new units of ETPs in the main register of Exchange 26 and (ii)credits these new units to the AP's account at the Exchange 26 (e.g.,creation of new ETPs as intermediated securities via delivery vs.payment (DVP) transfer instructions). At Step 208, upon completion ofStep 207, Custodian/CC 18 confirms receipt of cash, e.g., via custodianAPI, to Issuer 14 and to Administrator 15 (and optionally to CalculationAgent (not shown) and Global Paying Agent 24). At Step 209, Final Terms& Conditions are posted by Issuer 14 on a public website for seriesupsize. At Step 210, Exchange 26 clears ETPs on a DFP/FOP basis andcreates securities in the account of AP 12, while Global Paying Agent 24notifies Issuer 14 of the completed transaction.

As shown in FIGS. 6A-6B, a Cash AP Redemption Order involves theaforementioned PCF Creation Steps 1-4, followed by AP Creation OrderIn-Kind Steps 5 and 6, followed by Steps 407-410 on day T+1.

At Step 407, Issuer/PMC 14 instructs Custodian/CC 18 to prepare toretrieve Cash from the AP's account, e.g., using wire instructions,while Issuer 14 unwinds any short sale of the ETP. At Step 408, GlobalPaying Agent/PASC 24: (i) deregisters new units of ETPs in the mainregister of Exchange 26; and (ii) debits these from the AP's accountwith Exchange 26, via delivery free of payment (DVP) transferinstructions. At Step 409, upon completion of Step 8, Global PayingAgent 24 cancels respective units of ETPs to AP 12 via entry in theIssuers book of uncertificated securities, e.g., as shown in FIG. 12 .Global Paying Agent/PASC 24 also notifies Issuer/PMC 14 andAdministrator/FAC 15 of the cancellation. At Step 410, AP 12 confirmsreceipt of cash to Issuer 14.

Turning now to FIGS. 6C and 6D, embodiments of the present inventionoptionally enable an AP 12 to send the OTP bitcoin (BTC) or stable coinin exchange for purchasing the relevant crypto on their behalf in aprocess referred to as a “BTC Create.” In this process: OTP 16 consumesPCF information, OTP determines best execution on the market via APIintegrations with multiple custodians and exchanges, and the OTPdisplays ticking prices to Aps 12 who are then able to accept or rejectthe price. This process may be significantly less costly thanconventional approaches used for conventional ETFs which require astaffed capital markets desk. In particular embodiments, e.g., involvingan index with a relatively large number of components, this process isalso more efficient than an in-kind settled process. This process alsoavoids exposing the issuer 14 or investors in the ETP to any slippage onexecution.

Still further, as shown in FIGS. 6E-6G, data captured and parsed bythese embodiments are then available through a dashboard which allowsfor easy data visualization, e.g., of order history, transactions, PCFsand values. This occurs in a centralized manner, by parsing the datacaptured in the various native formats from the specialized computers,to generate a result that is unavailable from conventional sources.

Dealings of Cryptos by Issuer

It should be recognized that during its course of business, the Issuermay engage in the sale of crypto assets for fiat currencies. Scenariosinvolving sale of crypto assets include but not limited to thefollowing:

-   -   Investor Fees: crypto assets received as Investor Fee are sold        periodically for fiat currencies to fund the day-to-day        operation of the Issuer.    -   Additional Fees: the product may incur additional fees such as        below; these fees will be deducted from the proceeds of any sale        of crypto assets following the sale of investor fees, and may        include Processing Fees Payable to Administrators & Accounting        Team, Transaction Fees Payable to Custodian, and Other        transaction fees payable to execution partners.    -   Rebalancing: the weight allocation of the Underlying Assets in        the Index may change after the rebalancing at the end of each        month, thus requiring the purchase or sale of crypto assets to        ensure the Collateral properly matches the new composition. In        particular embodiments, this rebalancing is accomplished        automatically by OTP 16 by capturing updated index data,        recalculating exposures, executing trades to achieve a desired        balance. This allows execution as close to the rebalance time as        possible to reduce the need for human traders and accountants        (to help reduce cost and slippage).    -   Fork: new type of crypto assets may be created in the event of        fork. In the situation where Authorized Participant delivers the        newly forked crypto assets as part of its order, the Issuer may        sell the newly forked assets received at the next rebalance.    -   Airdrop: similar to forks, forked assets may be sold at the next        rebalance.        Fork

A “fork” is a scenario where a developer or group of developers cansplit the code base powering a crypto asset into two or more branches ofvariations of development. Forks result in the creation of a new assetwhich derives from the original blockchain. For example, a fork in theBitcoin blockchain resulted in the creation of Bitcoin Cash. These newassets are completely separate new entities. The recipient of the newasset must take specific actions to receive the newly created units(including setting up a wallet on that blockchain). Holders of theoriginal asset are under no obligation to do so and have the option tosimply forgo the event.

Embodiments of the present invention may optionally support forks in theunderlying assets, e.g., by adding the forked assets to the baskets ofthe underlying assets.

Airdrop

Airdrops are substantially equivalent to a dividend in kind and resultin the creation/allocation of new units of an existing asset toparticipants in the blockchain. The new units of crypto asset areallocated to some but not necessarily all participants on a blockchainand are typically designed to incentivize specific behavior in thenetwork (increased participation, maintaining infrastructure etc.).These actions are rare and generally only occur in smaller crypto assets(by market cap). Unlike a fork, an airdrop does not result in thecreation of a new asset but rather allocated additional units tospecific wallets (i.e. for every 1 BTC in a wallet would now have 2 BTCif it were participating in the airdrop). As a result, Airdrops do notrequire any special action to be taken by the Issuer in order toparticipate in the airdrop.

FIG. 14 shows a diagrammatic representation of a machine in theexemplary form of a computer system 300 within which a set ofinstructions, for causing the machine to perform any one of themethodologies discussed above, may be executed. In alternativeembodiments, the machine may include a network router, a network switch,a network bridge, Personal Digital Assistant (PDA), a cellulartelephone, a web appliance or any machine capable of executing asequence of instructions that specify actions to be taken by thatmachine.

The computer system 300 includes a processor 302, a main memory 304 anda static memory 306, which communicate with each other via a bus 308.The computer system 300 may further include a video display unit 310(e.g., a liquid crystal display (LCD), plasma, cathode ray tube (CRT),etc.). The computer system 300 may also include an alpha-numeric inputdevice 312 (e.g., a keyboard or touchscreen), a cursor control device314 (e.g., a mouse), a drive (e.g., disk, flash memory, etc.) unit 316,a signal generation device 320 (e.g., a speaker) and a network interfacedevice 322.

The drive unit 316 includes a computer-readable medium 324 on which isstored a set of instructions (i.e., software) 326 embodying any one, orall, of the methodologies described above. The software 326 is alsoshown to reside, completely or at least partially, within the mainmemory 304 and/or within the processor 302. The software 326 may furtherbe transmitted or received via the network interface device 322. For thepurposes of this specification, the term “computer-readable medium”shall be taken to include any medium that is capable of storing orencoding a sequence of instructions for execution by the computer andthat cause the computer to perform any one of the methodologies of thepresent invention. The term “computer-readable medium” shall accordinglybe taken to include, but not be limited to, solid-state memories, andoptical and magnetic disks.

Although the present invention has been described with reference tospecific exemplary embodiments, it will be evident that variousmodifications and changes may be made to these embodiments withoutdeparting from the broader spirit and scope of the invention.Accordingly, the specification and drawings are to be regarded in anillustrative rather than a restrictive sense.

Furthermore, embodiments of the present invention include a computerprogram code-based product, which includes a computer readable storagemedium having program code stored therein which can be used to instructa computer to perform any of the functions, methods and/or modulesassociated with the present invention. The non-transitory computerreadable medium includes any of, but not limited to, the following:CD-ROM, DVD, magnetic tape, optical disc, hard drive, floppy disk,ferroelectric memory, flash memory, ferromagnetic memory, opticalstorage, charge coupled devices, magnetic or optical cards, smart cards,EEPROM, EPROM, RAM, ROM, DRAM, SRAM, SDRAM, and/or any other appropriatestatic, dynamic, or volatile memory or data storage devices, but doesnot include a transitory signal per se.

It should be noted that the various modules and other components of theembodiments discussed hereinabove may be configured as hardware, ascomputer readable code stored in any suitable non-transitory computerusable medium, such as ROM, RAM, flash memory, phase-change memory,magnetic disks, etc., and/or as combinations thereof, without departingfrom the scope of the present invention.

It should be further understood that any of the features described withrespect to one of the embodiments described herein may be similarlyapplied to any of the other embodiments described herein withoutdeparting from the scope of the present invention.

In the preceding specification, the invention has been described withreference to specific exemplary embodiments for the purposes ofillustration and description. It is not intended to be exhaustive or tolimit the invention to the precise form disclosed. Many modificationsand variations are possible in light of this disclosure. It is intendedthat the scope of the invention be limited not by this detaileddescription, but rather by the claims appended hereto.

The above systems are implemented in various computing environments. Forexample, the present invention may be implemented on a conventional IBMPC or equivalent, multi-nodal system (e.g., LAN) or networking system(e.g., Internet, WWW, wireless web). All programming and data relatedthereto are stored in computer memory, static or dynamic ornon-volatile, and may be retrieved by the user in any of: conventionalcomputer storage, display (e.g., CRT, flat panel LCD, plasma, etc.)and/or hardcopy (i.e., printed) formats. The programming of the presentinvention may be implemented by one skilled in the art of computersystems and/or software design.

Certain aspects of the present invention include process steps andinstructions described herein in the form of an algorithm. It should benoted that the process steps and instructions of the present inventioncould be embodied in software, firmware or hardware, and when embodiedin software, could be downloaded to reside on and be operated fromdifferent platforms used by real time network operating systems.Moreover, the particular naming of the components, capitalization ofterms, the attributes, data structures, or any other programming orstructural aspect is not mandatory or significant, and the mechanismsthat implement the invention or its features may have different names,formats, or protocols.

Moreover, unless specifically stated otherwise as apparent from theabove discussion, it is appreciated that throughout the description,discussions utilizing terms such as “processing” or “computing” or“calculating” or “determining” or “displaying” or the like, refer to theaction and processes of a computer system, or similar electroniccomputing device, that manipulates and transforms data represented asphysical (electronic) quantities within the computer system memories orregisters or other such information storage, transmission or displaydevices.

In addition, the present invention is not described with reference toany particular programming language. It is appreciated that a variety ofprogramming languages may be used to implement the teachings of thepresent invention as described herein, and any references to specificlanguages are provided for disclosure of enablement and best mode of thepresent invention.

The present invention is well suited to a wide variety of computernetwork systems over numerous topologies. Within this field, theconfiguration and management of large networks comprise storage devicesand computers that are communicatively coupled to dissimilar computersand storage devices over a network, such as the Internet.

Modifications, additions, or omissions may be made to the systems,apparatuses, and methods described herein without departing from thescope of the disclosure. For example, the components of the systems andapparatuses may be integrated or separated. Moreover, the operations ofthe systems and apparatuses disclosed herein may be performed by more,fewer, or other components and the methods described may include more,fewer, or other steps. Additionally, steps may be performed in anysuitable order. It should be further understood that any of the featuresdescribed with respect to one of the embodiments described herein may besimilarly applied to any of the other embodiments described hereinwithout departing from the scope of the present invention. As used inthis document, “each” refers to each member of a set or each member of asubset of a set.

To aid the Patent Office and any readers of any patent issued on thisapplication in interpreting the claims appended hereto, applicants wishto note that they do not intend any of the appended claims or claimelements to invoke 35 U.S.C. 112(f) unless the words “means for” or“step for” are explicitly used in the particular claim.

Having thus described the invention, what is claimed is:
 1. A systemcomprising: one or more processors; one or more memories includinginstructions executable by the one or more processors to cause the oneor more processors to perform operations including: receiving a creationorder from an authorized participant for units of an exchange tradedproduct (ETP) that contains a cryptocurrency; confirming a transfer overa blockchain of an amount of the cryptocurrency from the authorizedparticipant in exchange for the units; determining a number of the unitsto provide to the authorized participant; initiating a settlementprocess for the creation order in which the number of units are issuedto the authorized participant; receiving data in multiple formats frommultiple computers, the data being associated with the ETP; parsing andaggregating the data to generate a graphical dashboard configured formanaging the ETP, the graphical dashboard including information aboutthe ETP; and providing the graphical dashboard.
 2. The system of claim1, wherein the graphical dashboard is configured for managing multipleETPs.
 3. The system of claim 2, wherein the information is about themultiple ETPs.
 4. The system of claim 1, wherein the graphical dashboardindicates an order status associated with a most recent creation orderor a most recent redemption order.
 5. The system of claim 1, wherein theoperations further comprise: transmitting delivery-free-of-payment (DFP)instructions to an exchange, the DFP instructions being configured tocause the exchange to credit the number of units to an account of theauthorized participant on the exchange.
 6. The system of claim 1,wherein the number of the units is determined based on the amount of thecryptocurrency received from the authorized participant in exchange forthe units.
 7. A method comprising: receiving, by one or more processors,a creation order from an authorized participant for units of an exchangetraded product (ETP) that contains a cryptocurrency; confirming, by theone or more processors, a transfer over a blockchain of an amount of thecryptocurrency from the authorized participant in exchange for theunits; determining, by the one or more processors, a number of the unitsto provide to the authorized participant; initiating, by the one or moreprocessors, a settlement process for the creation order in which thenumber of units are issued to the authorized participant; receiving, bythe one or more processors, data in multiple formats from multiplecomputers, the data being associated with the ETP; parsing andaggregating, by the one or more processors, the data to generate agraphical dashboard configured for managing the ETP, the graphicaldashboard including information about the ETP; and providing, by the oneor more processors, the graphical dashboard.
 8. The method of claim 7,wherein the graphical dashboard is configured for managing multipleETPs.
 9. The method of claim 8, wherein the information is about themultiple ETPs.
 10. The method of claim 7, wherein the graphicaldashboard indicates an order status associated with a most recentcreation order or a most recent redemption order.
 11. The method ofclaim 7, further comprising: transmitting delivery-free-of-payment (DFP)instructions to an exchange, the DFP instructions being configured tocause the exchange to credit the number of units to an account of theauthorized participant on the exchange.
 12. The method of claim 7,wherein the number of the units is determined based on the amount of thecryptocurrency received from the authorized participant in exchange forthe units.
 13. A non-transitory computer-readable medium comprisingprogram code that is executable by one or more processors to cause theone or more processors to perform operations including: receiving acreation order from an authorized participant for units of an exchangetraded product (ETP) that contains a cryptocurrency; confirming atransfer over a blockchain of an amount of the cryptocurrency from theauthorized participant in exchange for the units; determining a numberof the units to provide to the authorized participant; initiating asettlement process for the creation order in which the number of unitsare issued to the authorized participant; receiving data in multipleformats from multiple computers, the data being associated with the ETP;parsing and aggregating, by the one or more processors, the data togenerate a graphical dashboard configured for managing the ETP, thegraphical dashboard including information about the ETP; and providingthe graphical dashboard.
 14. The non-transitory computer-readable mediumof claim 13, wherein the graphical dashboard is configured for managingmultiple ETPs.
 15. The non-transitory computer-readable medium of claim14, wherein the information is about the multiple ETPs.
 16. Thenon-transitory computer-readable medium of claim 13, wherein thegraphical dashboard indicates an order status associated with a mostrecent creation order or a most recent redemption order.
 17. Thenon-transitory computer-readable medium of claim 13, wherein theoperations further comprise: transmitting delivery-free-of-payment (DFP)instructions to an exchange, the DFP instructions being configured tocause the exchange to credit the number of units to an account of theauthorized participant on the exchange.